There is no debate in my neck of the woods that West Virginia families — especially lower-wage working folks — are struggling with the effects of high inflation on their family budgets.
A recent trip to Food Lion certainly made me feel the squeeze as I watched the total climb up at the check-out. The proof is in the pudding — or the price tag of the pudding. And the price tag on fruit, cheese, chicken, coffee, cake mix, peanut butter and every other dang thing in my grocery cart.
What is more controversial is understanding the causes of that inflation and what should be done to help slow it. As an economist, I have been listening to the explanations pointing to international supply bottlenecks and consumer pent-up demand created by the COVID-19 pandemic. Yes, these two economic phenomena are part of what is pushing up prices.
But there is another element in the inflation picture that doesn’t get talked about enough. And I think it is key. For some reason, some of my fellow economists appear hesitant to call out a critical driver of inflation that isn’t complicated or hard to understand: corporate greed. It doesn’t take a Ph.D. in economics to figure this out.
Yes, a few economists are calling this out — check out the research from the Groundwork Collaborative.
Amid a pandemic, a supply chain crisis and the war in Ukraine, mega corporations are taking advantage of this moment to raise prices above their increased costs on everyday goods and passing their winnings to Wall Street investors. Corporate executives are crowing about how well this strategy is working on quarterly earnings calls — and investors are eating it up as corporate profits soar 25% year over year.
Executives on corporate earnings calls praise their teams for driving prices upward and see “optimism” and “opportunity” in the current inflation crisis.
Powerful corporations are using inflation as an excuse to jack up prices and haul in record-breaking profit margins — the highest in 70 years — all while workers, families and small businesses are struggling to pay their bills. Corporate profiteering is one big reason families are seeing the costs of necessities, like prescription drugs, groceries and diapers, go up. And it’s squeezing small and mid-sized businesses and undermining recent wage gains for low-income workers.
Corporations can get away with it because concentration is rampant across many industries — which gives them the power to increase prices without fear of losing customers to competitors. For example, there are four meatpackers that control 85% of the U.S. industry. There is one manufacturer of a chip needed for billions of electronic products.
People don’t doubt that corporate profiteering exists. A recent poll of voters from the Groundwork Collaborative found:
- 63% believe “large corporations are taking advantage of the pandemic to raise prices unfairly on consumers and increase profits.”
- 80% support the federal government “Crack[ing] down on large corporations that raise prices unfairly, and promot[ing] competition between businesses to lower prices for consumers and small businesses.” This includes 79% of independents and 74% of Republicans.
- A recent polling of small-business owners found that 63% think “large corporations have been taking advantage of inflation to raise their prices on customers unnecessarily and increase profits.”
Unless our nation addresses profiteering, investors will continue to demand excessive profits and CEOs will continue to raise prices. We need policy responses that stand up to corporate power grabs and address corporate profiteering, monopoly power and price gouging head-on.
Regulators must enforce laws on the books to reduce illegal activities, like price-fixing and collusion, and enhance competition. The Department of Justice and the Federal Trade Commission should aggressively crack down on monopoly power, and state attorneys general should act, as well.
Congress should enact a federal price-gouging statute to prevent excess price hikes during times of economic transition, war, climate shocks and global health crises. Congress should reinstate a historic tax on excess profits to discourage profiteering by greedy companies and incentivize companies to increase productivity by investing in workers and innovation.
Curtailing corporate greed is not an impossible task. There are policy fixes. The question is: Do we have policymakers who will stand up to corporate greed? Or have corporate dollars flowing to campaign chests bought their votes?